Abbott Reports Third-Quarter 2018 Results
ABBOTT PARK, Ill., Oct. 17, 2018 /PRNewswire/ -- Abbott (NYSE: ABT) today announced financial results for the third quarter ended Sept. 30, 2018.
-- Third-quarter worldwide sales of $7.7 billion increased 12.1 percent on
a reported basis and 7.8 percent on an organic* basis.
-- Reported diluted EPS from continuing operations under GAAP was $0.31 in
the third quarter.
-- Adjusted diluted EPS from continuing operations, which excludes
specified items, was $0.75.
-- Abbott narrowed its full-year 2018 diluted EPS guidance range from
continuing operations on a GAAP basis to $1.33 to $1.35 and adjusted
diluted EPS from continuing operations to $2.87 to $2.89.
-- In the U.S., Abbott received FDA approval of its FreeStyle(®) Libre 14
day sensor, making it the longest lasting wearable glucose sensor
available. In October, Abbott obtained CE Mark for its FreeStyle Libre 2
system, a next-generation product offering with optional real-time
alarms.
-- FreeStyle Libre achieving rapid market uptake, with third-quarter
worldwide sales of $304 million, an increase of 101 percent versus prior
year.
-- In July, Abbott received U.S. FDA approval for its third-generation
version of its minimally invasive MitraClip(®) heart valve repair
device. This new version includes design advancements that simplify the
procedure and enable more patients to be treated with MitraClip.
-- In September, Abbott announced positive clinical results from its
landmark COAPT study, which demonstrated that its minimally invasive
MitraClip heart valve repair device improved survival and clinical
outcomes for select patients with functional mitral regurgitation, a
leaky heart valve resulting from advanced heart failure. The COAPT study
data will be submitted to the U.S. FDA to support consideration of an
expanded indication for MitraClip.
"We achieved another quarter of strong growth and our new product pipeline continues to be highly productive," said Miles D. White, chairman and chief executive officer, Abbott. "In spite of increasing currency headwinds, we're well-positioned to achieve the upper end of our initial full-year guidance."
* See note on organic growth below.
THIRD-QUARTER BUSINESS OVERVIEW
Note: Management believes that measuring sales growth rates on an organic basis is an appropriate way for investors to best understand the underlying performance of the business.
Organic sales growth:
-- Excludes prior year results for the Abbott Medical Optics (AMO) and St.
Jude Medical vascular closure businesses, which were divested during the
first quarter 2017;
-- Excludes the current and prior year results for Rapid Diagnostics, which
reflect results for Alere Inc., which was acquired on Oct. 3, 2017; and
-- Excludes the impact of foreign exchange.
Following are sales by business segment and commentary for the third quarter and first nine months of 2018:
Total Company
---
($ in millions)
% Change vs. 3Q17
Sales 3Q18 Reported Organic
U.S. Int'l Total U.S. Int'l Total U.S. Int'l Total
Total * 2,707 4,949 7,656 17.0 9.6 12.1 5.2 9.2 7.8
Nutrition 774 1,064 1,838 2.1 5.3 4.0 2.1 9.1 6.1
Diagnostics 666 1,158 1,824 80.2 27.3 42.6 6.1 8.1 7.5
Established Pharmaceuticals 1,159 1,159
n/a (0.9) (0.9)
n/a 5.9 5.9
Medical Devices 1,258 1,557 2,815 6.9 9.7 8.4 6.9 12.2 9.8
* Total 2018 Abbott sales
from continuing operations
include Other Sales of $20
million.
% Change vs. 9M17
Sales 9M18 Reported Organic
U.S. Int'l Total U.S. Int'l Total U.S. Int'l Total
Total * 8,084 14,729 22,813 15.5 15.0 15.2 4.6 9.2 7.6
Nutrition 2,313 3,139 5,452 2.3 9.0 6.1 2.3 8.5 5.8
Diagnostics 2,018 3,516 5,534 79.4 36.0 49.2 3.3 8.0 6.6
Established
Pharmaceuticals 3,332 3,332
n/a 6.1 6.1
n/a 8.3 8.3
Medical Devices 3,726 4,724 8,450 6.3 15.7 11.4 6.5 11.4 9.1
* Total 2018 Abbott sales from
continuing operations include
Other Sales of $45 million.
n/a = Not Applicable.
Note: In order to compute
results excluding the impact
of exchange rates, current
year U.S. dollar sales are
multiplied or divided, as
appropriate, by the current
year average foreign exchange
rates and then those amounts
are multiplied or divided, as
appropriate, by the prior year
average foreign exchange
rates.
Third-quarter 2018 worldwide sales of $7.7 billion increased 12.1 percent on a reported basis. On an organic basis, worldwide sales increased 7.8 percent. Refer to tables titled "Non-GAAP Reconciliation of Adjusted Historical Revenue" for a reconciliation of adjusted historical revenue.
Nutrition
---
($ in millions)
% Change vs. 3Q17
Sales 3Q18 Reported Organic
U.S. Int'l Total U.S. Int'l Total U.S. Int'l Total
Total 774 1,064 1,838 2.1 5.3 4.0 2.1 9.1 6.1
Pediatric 459 580 1,039 5.5 7.4 6.6 5.5 10.9 8.5
Adult 315 484 799 (2.4) 2.9 0.8 (2.4) 7.1 3.2
% Change vs. 9M17
Sales 9M18 Reported Organic
U.S. Int'l Total U.S. Int'l Total U.S. Int'l Total
Total 2,313 3,139 5,452 2.3 9.0 6.1 2.3 8.5 5.8
Pediatric 1,376 1,708 3,084 3.7 9.3 6.8 3.7 8.5 6.3
Adult 937 1,431 2,368 0.2 8.7 5.2 0.2 8.5 5.1
Worldwide Nutrition sales increased 4.0 percent on a reported basis in the third quarter, including an unfavorable 2.1 percent effect of foreign exchange, and increased 6.1 percent on an organic basis.
Worldwide Pediatric Nutrition sales increased 6.6 percent on a reported basis in the third quarter, including an unfavorable 1.9 percent effect of foreign exchange, and increased 8.5 percent on an organic basis. International pediatric sales increased 7.4 percent on a reported basis, including an unfavorable 3.5 percent effect of foreign exchange, and increased 10.9 percent on an organic basis. Strong performance in the quarter was led by above-market growth in the U.S. and double-digit growth in both Asia and Latin America.
Worldwide Adult Nutrition sales increased 0.8 percent on a reported basis in the third quarter, including an unfavorable 2.4 percent effect of foreign exchange, and increased 3.2 percent on an organic basis. International adult sales increased 2.9 percent on a reported basis, including an unfavorable 4.2 percent effect of foreign exchange, and increased 7.1 percent on an organic basis. Sales performance was led by strong growth of Ensure(®), Abbott's market-leading complete and balanced nutrition brand, and Glucerna(®), Abbott's market-leading diabetes-specific nutrition brand. U.S. sales were negatively impacted by Abbott's wind down of a non-core product line.
Diagnostics
---
($ in millions)
% Change vs. 3Q17
Sales 3Q18 Reported Organic
U.S. Int'l Total U.S. Int'l Total U.S. Int'l Total
Total * 666 1,158 1,824 80.2 27.3 42.6 6.1 8.1 7.5
Core Laboratory 249 837 1,086 8.2 4.3 5.2 8.2 8.1 8.1
Molecular 37 84 121 2.3 5.8 4.7 2.3 7.9 6.1
Point of Care 106 30 136 2.7 7.4 3.7 2.7 8.6 4.0
Rapid Diagnostics * 274 207 481
n/m
n/m
n/m
n/m
n/m
n/m
* Rapid Diagnostics reflects sales from Alere Inc., which was acquired on Oct. 3, 2017. Organic growth rates above exclude results from the Rapid Diagnostics business.
% Change vs. 9M17
Sales 9M18 Reported Organic
U.S. Int'l Total U.S. Int'l Total U.S. Int'l Total
Total * 2,018 3,516 5,534 79.4 36.0 49.2 3.3 8.0 6.6
Core Laboratory 725 2,508 3,233 6.9 9.7 9.1 6.9 7.6 7.4
Molecular 114 247 361 (6.8) 12.9 5.8 (6.8) 10.9 4.5
Point of Care 324 92 416 (0.3) 13.8 2.5 (0.3) 12.1 2.2
Rapid Diagnostics * 855 669 1,524
n/m
n/m
n/m
n/m
n/m
n/m
* Rapid Diagnostics reflects sales from Alere Inc., which was acquired on Oct. 3, 2017. Organic growth rates above exclude results from the Rapid Diagnostics business.
n/m = Percent change is not meaningful.
Worldwide Diagnostics sales increased 42.6 percent on a reported basis in the third quarter. On an organic basis, sales increased 7.5 percent. Refer to tables titled "Non-GAAP Reconciliation of Adjusted Historical Revenue" for a reconciliation of adjusted historical revenue.
Core Laboratory Diagnostics sales increased 5.2 percent on a reported basis in the third quarter, including an unfavorable 2.9 percent effect of foreign exchange, and increased 8.1 percent on an organic basis, reflecting above-market growth in the U.S. and internationally.
Molecular Diagnostics sales increased 4.7 percent on a reported basis in the third quarter, including an unfavorable 1.4 percent effect of foreign exchange, and increased 6.1 percent on an organic basis. Worldwide sales were led by growth in infectious disease testing, Abbott's core area of focus in the molecular diagnostics market.
Point of Care Diagnostics sales increased 3.7 percent on a reported basis in the third quarter, including an unfavorable 0.3 percent effect of foreign exchange, and increased 4.0 percent on an organic basis, led by strong international growth of Abbott's i-STAT(®) handheld system.
Rapid Diagnostics worldwide sales of $481 million were led by cardiometabolic testing.
Established Pharmaceuticals
---
($ in millions)
% Change vs. 3Q17
Sales 3Q18 Reported Organic
U.S. Int'l Total U.S. Int'l Total U.S. Int'l Total
Total 1,159 1,159
n/a (0.9) (0.9)
n/a 5.9 5.9
Key Emerging
Markets 866 866
n/a (2.1) (2.1)
n/a 6.8 6.8
Other 293 293
n/a 2.8 2.8
n/a 3.1 3.1
% Change vs. 9M17
Sales 9M18 Reported Organic
U.S. Int'l Total U.S. Int'l Total U.S. Int'l Total
Total 3,332 3,332
n/a 6.1 6.1
n/a 8.3 8.3
Key Emerging
Markets 2,525 2,525
n/a 4.6 4.6
n/a 8.5 8.5
Other 807 807
n/a 10.8 10.8
n/a 7.3 7.3
Established Pharmaceuticals sales decreased 0.9 percent on a reported basis in the third quarter, including an unfavorable 6.8 percent effect of foreign exchange, and increased 5.9 percent on an organic basis. As expected, sales growth in the quarter was negatively impacted by a comparison versus the third-quarter 2017, when sales were higher than normal due to channel restocking across the market after implementation of a new tax system in India.
Key Emerging Markets include India, Brazil, Russia and China along with several additional emerging countries that represent the most attractive long-term growth opportunities for Abbott's branded generics product portfolio. Sales in these geographies decreased 2.1 percent on a reported basis in the third quarter, including an unfavorable 8.9 percent effect of foreign exchange, and increased 6.8 percent on an organic basis. Sales growth was led by double-digit growth in China and Russia. Excluding the negative impact from prior year purchasing patterns associated with the implementation of a new tax system in India, Abbott's Key Emerging Markets sales would have increased high-single digits on an organic basis in the third quarter.
Medical Devices
---
($ in millions)
% Change vs. 3Q17
Sales 3Q18 Reported Organic
U.S. Int'l Total U.S. Int'l Total U.S. Int'l Total
Total 1,258 1,557 2,815 6.9 9.7 8.4 6.9 12.2 9.8
Cardiovascular and Neuromodulation 1,134 1,169 2,303 3.7 3.4 3.6 3.7 5.9 4.8
Rhythm Management 252 256 508 0.6 (2.0) (0.7) 0.6 0.6 0.6
Electrophysiology 189 217 406 27.9 11.5 18.5 27.9 13.6 19.7
Heart Failure 111 41 152 (14.2) 4.4 (9.9) (14.2) 7.4 (9.2)
Vascular 284 436 720 (2.7) 0.7 (0.7) (2.7) 2.7 0.5
Structural Heart 126 179 305 15.8 12.0 13.6 15.8 15.1 15.4
Neuromodulation 172 40 212 4.3 (5.5) 2.3 4.3 (1.7) 3.1
Diabetes Care 124 388 512 49.0 34.0 37.4 49.0 37.2 39.8
% Change vs. 9M17
Sales 9M18 Reported Organic
U.S. Int'l Total U.S. Int'l Total U.S. Int'l Total
Total 3,726 4,724 8,450 6.3 15.7 11.4 6.5 11.4 9.1
Cardiovascular and Neuromodulation 3,404 3,643 7,047 4.3 9.7 7.0 4.5 5.7 5.1
Rhythm Management 778 808 1,586 (0.6) 2.1 0.8 (0.6) (1.7) (1.2)
Electrophysiology 564 661 1,225 26.2 19.2 22.3 26.2 15.0 20.0
Heart Failure 342 126 468 (5.5) 16.0 (0.6) (5.5) 11.8 (1.5)
Vascular 854 1,355 2,209 (4.2) 7.0 2.4 (3.5) 3.5 0.6
Structural Heart 353 560 913 10.5 18.3 15.2 10.5 13.3 12.2
Neuromodulation 513 133 646 11.1 4.0 9.5 11.1 0.2 8.7
Diabetes Care 322 1,081 1,403 34.3 42.0 40.2 34.3 36.2 35.7
Worldwide Medical Devices sales increased 8.4 percent on a reported basis in the third quarter. On an organic basis, sales increased 9.8 percent. Refer to table titled "Non-GAAP Reconciliation of Adjusted Historical Revenue" for a reconciliation of adjusted historical revenue.
In Electrophysiology, growth was led by strong performance in cardiac mapping and ablation catheters as well as strong growth of Abbott's Confirm Rx(TM) Insertable Cardiac Monitor (ICM), the world's first and only smartphone-compatible ICM designed to help physicians remotely identify cardiac arrhythmias.
Growth in Structural Heart was driven by several product areas across Abbott's broad portfolio, including AMPLATZER(TM )PFO Occluder, a device designed to close a hole-like opening in the heart, and MitraClip, Abbott's market-leading device for the minimally invasive treatment of mitral regurgitation, a leaky heart valve. In September, Abbott announced positive clinical results from its landmark COAPT study, which demonstrated that MitraClip improved survival and clinical outcomes for select patients with functional mitral regurgitation. The COAPT study data will be submitted to the U.S. FDA to support consideration of an expanded indication for MitraClip.
In Diabetes Care, sales increased 37.4 percent on a reported basis and 39.8 percent on an organic basis, led by rapid market uptake of FreeStyle Libre, Abbott's revolutionary sensor-based continuous glucose monitoring system, which removes the need for routine fingersticks(1) for people with diabetes. During the quarter, Abbott received U.S. FDA approval of its FreeStyle Libre 14 day sensor, the longest lasting glucose wearable sensor available. In October, Abbott obtained CE Mark for its FreeStyle Libre 2 system, a next-generation product offering optional real-time alarms.
ABBOTT'S FULL-YEAR EARNINGS-PER-SHARE GUIDANCE
Abbott is narrowing its 2018 diluted earnings per share from continuing operations under Generally Accepted Accounting Principles (GAAP) to $1.33 to $1.35.
Abbott forecasts net specified items for the full year 2018 of approximately $1.54 per share. Specified items include intangible amortization expense, acquisition-related expenses, charges associated with cost reduction initiatives and other expenses.
Excluding specified items, projected adjusted diluted earnings per share from continuing operations would be $2.87 to $2.89 for the full year 2018.
Abbott is issuing fourth-quarter 2018 guidance for diluted earnings per share from continuing operations under GAAP of $0.39 to $0.41. Abbott forecasts specified items for the fourth quarter 2018 of $0.41 primarily related to intangible amortization, acquisition-related expenses, cost reduction initiatives and other expenses. Excluding specified items, projected adjusted diluted earnings per share from continuing operations would be $0.80 to $0.82 for the fourth quarter.
ABBOTT DECLARES 379(TH) CONSECUTIVE QUARTERLY DIVIDEND
On Sept. 13, 2018, the board of directors of Abbott declared the company's quarterly dividend of $0.28 per share. Abbott's cash dividend is payable Nov. 15, 2018, to shareholders of record at the close of business on Oct. 15, 2018.
Abbott has increased its dividend payout for 46 consecutive years and is a member of the S&P 500 Dividend Aristocrats Index, which tracks companies that have annually increased their dividend for at least 25 consecutive years.
About Abbott:
Abbott is a global healthcare company devoted to improving life through the development of products and technologies that span the breadth of healthcare. With a portfolio of leading, science-based offerings in diagnostics, medical devices, nutritionals and branded generic pharmaceuticals, Abbott serves people in more than 150 countries and employs approximately 99,000 people.
Visit Abbott at www.abbott.com and connect with us on Twitter at @AbbottNews.
Abbott will webcast its live third-quarter earnings conference call through its Investor Relations website at www.abbottinvestor.com at 8 a.m. Central time today. An archived edition of the webcast will be available later that day.
-- Private Securities Litigation Reform Act of 1995 --
A Caution Concerning Forward-Looking Statements
Some statements in this news release may be forward-looking statements for purposes of the Private Securities Litigation Reform Act of 1995. Abbott cautions that these forward-looking statements are subject to risks and uncertainties that may cause actual results to differ materially from those indicated in the forward-looking statements. Economic, competitive, governmental, technological and other factors that may affect Abbott's operations are discussed in Item 1A, "Risk Factors'' to our Annual Report on Securities and Exchange Commission Form 10-K for the year ended Dec. 31, 2017, and are incorporated by reference. Abbott undertakes no obligation to release publicly any revisions to forward-looking statements as a result of subsequent events or developments, except as required by law.
(1) Fingersticks are required
for treatment decisions when
you see Check Blood Glucose
symbol, when symptoms do not
match system readings, when
you suspect readings may be
inaccurate, or when you
experience symptoms that may
be due to high or low blood
glucose.
Abbott Laboratories and Subsidiaries
Condensed Consolidated Statement of Earnings
Third Quarter Ended September 30, 2018 and 2017
(in millions, except per share data)
(unaudited)
3Q18 3Q17 % Change
Net Sales $7,656 $6,829 12.1
Cost of products sold,
excluding amortization
expense 3,166 2,876 10.1
Amortization of intangible
assets 544 501 8.7
Research and development 574 568 1.1
Selling, general, and
administrative 2,377 2,115 12.4
Total Operating Cost and
Expenses 6,661 6,060 9.9
Operating earnings 995 769 29.2 1)
Interest expense, net 181 182 (0.4)
Net foreign exchange (gain)
loss 11 (6)
n/m
Debt extinguishment costs 67
n/m
Other (income) expense, net 18 (33)
n/m 1)
Earnings from Continuing
Operations before taxes 718 626 14.6
Tax expense on Earnings from
Continuing Operations 166 65
n/m
Earnings from Continuing
Operations 552 561 (1.7)
Earnings from Discontinued
Operations, net of taxes 11 42 (72.4)
Net Earnings $563 $603 (6.7)
Earnings from Continuing
Operations, excluding
Specified Items, as described
below $1,342 $1,158 15.9 2)
Diluted Earnings per Common
Share from:
Continuing Operations $0.31 $0.32 (3.1)
Discontinued Operations 0.01 0.02 (50.0)
Total $0.32 $0.34 (5.9)
Diluted Earnings per Common
Share from Continuing
Operations, excluding
Specified Items, as described
below $0.75 $0.66 13.6 2)
Average Number of Common
Shares Outstanding
Plus Dilutive Common Stock
Options 1,772 1,754
NOTES:
See tables titled "Non-GAAP
Reconciliation of Financial
Information From Continuing
Operations" for an
explanation of certain non-
GAAP financial information.
n/m = Percent change is not
meaningful.
See footnotes below.
1) Effective January 1, 2018, Abbott
adopted Accounting Standards Update
2017-07, Compensation - Retirement
Benefits (Topic 715): Improving the
Presentation of Net Periodic Pension
Cost and Net Periodic Postretirement
Benefit Cost, which resulted in a
retrospective reclassification of
approximately $40 million of net
pension-related income from
Operating earnings to Other (income)
expense, net for the third quarter
of 2017.
2) 2018 Net Earnings and Diluted
Earnings per Common Share from
Continuing Operations, excluding
Specified Items, excludes net
after-tax charges of $790 million,
or $0.44 per share, for intangible
amortization expense and other
expenses primarily associated with
acquisitions and restructuring
actions.
2017 Net Earnings and Diluted
Earnings per Common Share from
Continuing Operations, excluding
Specified Items, excludes net
after-tax charges of $597 million,
or $0.34 per share, for intangible
amortization expense and other
expenses primarily associated with
acquisitions and restructuring
actions.
Abbott Laboratories and Subsidiaries
Condensed Consolidated Statement of Earnings
Nine Months Ended September 30, 2018 and 2017
(in millions, except per share data)
(unaudited)
9M18 9M17 % Change
Net Sales $22,813 $19,801 15.2
Cost of products sold,
excluding amortization
expense 9,515 9,127 4.2
Amortization of intangible
assets 1,690 1,415 19.5
Research and development 1,738 1,641 5.9
Selling, general, and
administrative 7,385 6,705 10.1
Total Operating Cost and
Expenses 20,328 18,888 7.6
Operating earnings 2,485 913
n/m 1)
Interest expense, net 569 569 0.0
Net foreign exchange (gain)
loss 2 (34)
n/m
Debt extinguishment costs 81
n/m
Other (income) expense, net (93) (1,279) (92.7) 1) 2)
Earnings from Continuing
Operations before taxes 1,926 1,657 16.2
Tax expense on Earnings from
Continuing Operations 247 440 (43.8) 3)
Earnings from Continuing
Operations 1,679 1,217 37.9
Earnings from Discontinued
Operations, net of taxes 35 88 (60.5) 4)
Net Earnings $1,714 $1,305 31.3
Earnings from Continuing
Operations, excluding
Specified Items, as described
below $3,687 $3,097 19.0 5)
Diluted Earnings per Common
Share from:
Continuing Operations $0.94 $0.69 36.2
Discontinued Operations 0.02 0.05 (60.0) 4)
Total $0.96 $0.74 29.7
Diluted Earnings per Common
Share from Continuing
Operations, excluding
Specified Items, as described
below $2.07 $1.76 17.6 5)
Average Number of Common
Shares Outstanding
Plus Dilutive Common Stock
Options 1,769 1,746
NOTES:
See tables titled "Non-GAAP
Reconciliation of Financial
Information From Continuing
Operations" for an
explanation of certain non-
GAAP financial information.
n/m = Percent change is not
meaningful.
See footnotes below.
1) Effective January 1, 2018, Abbott
adopted Accounting Standards Update
2017-07, Compensation - Retirement
Benefits (Topic 715): Improving the
Presentation of Net Periodic Pension
Cost and Net Periodic Postretirement
Benefit Cost, which resulted in a
retrospective reclassification of
approximately $120 million of net
pension-related income from
Operating earnings to Other (income)
expense, net for the first nine
months of 2017.
2) 2017 Other (income) expense, net
includes a pretax gain of $1.163
billion from the sale of the AMO
business.
3) 2018 Tax expense on Earnings from
Continuing Operations includes the
impact of approximately $80 million
in excess tax benefits associated
with share-based compensation.
2017 Tax expense on Earnings from
Continuing Operations includes the
tax associated with a $1.163
billion pretax gain on the sale of
the AMO business.
4) 2018 and 2017 Earnings and Diluted
Earnings per Common Share from
Discontinued Operations, net of
taxes primarily relates to a net
tax benefit as a result of the
resolution of various tax positions
from prior years.
5) 2018 Net Earnings and Diluted
Earnings per Common Share from
Continuing Operations, excluding
Specified Items, excludes net
after-tax charges of $2.008
billion, or $1.13 per share, for
intangible amortization expense and
other expenses primarily associated
with acquisitions and restructuring
actions.
2017 Net Earnings and Diluted
Earnings per Common Share from
Continuing Operations, excluding
Specified Items, excludes net
after-tax charges of $1.880
billion, or $1.07 per share, for
intangible amortization expense and
other expenses primarily associated
with acquisitions and restructuring
actions, partially offset by a gain
on the sale of the AMO business.
Abbott Laboratories and Subsidiaries
Non-GAAP Reconciliation of Financial Information From Continuing Operations
Third Quarter Ended September 30, 2018 and 2017
(in millions, except per share data)
(unaudited)
3Q18
As Specified
As % to
Reported
(GAAP) Items
Adjusted
Sales
Intangible Amortization $544 $(544)
Gross Margin 3,946 609 $4,555 59.5%
R&D 574 (18) 556 7.3%
SG&A 2,377 (105) 2,272 29.7%
Debt extinguishment costs 67 (67)
Other (income) expense, net 18 (52) (34)
Earnings from Continuing
Operations before taxes 718 851 1,569
Tax expense on Earnings from
Continuing Operations 166 61 227
Earnings from Continuing
Operations 552 790 1,342
Diluted Earnings per Share from
Continuing Operations $0.31 $0.44 $0.75
Specified items reflect intangible amortization expense of $544 million and other expenses of $307 million, primarily associated with acquisitions, restructuring actions and other expenses. See tables titled "Details of Specified Items" for additional details regarding specified items.
3Q17
As Specified
As % to Sales
Reported(GAAP) Items
Adjusted
Intangible
Amortization $501 $(501)
Gross Margin 3,452 580 $4,032 59.1%
R&D 568 (91) 477 7.0%
SG&A 2,115 (90) 2,025 29.6%
Other (income)
expense, net (33) 1 (32)
Earnings from
Continuing
Operations before
taxes 626 760 1,386
Tax expense on
Earnings from
Continuing
Operations 65 163 228
Earnings from
Continuing
Operations 561 597 1,158
Diluted Earnings
per Share from
Continuing
Operations $0.32 $0.34 $0.66
Note: The As Reported and As
Adjusted amounts reflect the
impact of adopting the new
accounting rules related to the
recognition of retirement
benefits - See Footnote 1 on
table titled "Condensed
Consolidated Statement of
Earnings" for additional
information.
Specified items reflect intangible amortization expense of $501 million and other expenses of $259 million, primarily associated with acquisitions, restructuring actions and other expenses. See tables titled "Details of Specified Items" for additional details regarding specified items.
Abbott Laboratories and Subsidiaries
Non-GAAP Reconciliation of Financial Information From Continuing Operations
Nine Months Ended September 30, 2018 and 2017
(in millions, except per share data)
(unaudited)
9M18
As Specified Items
As % to
Reported
(GAAP)
Adjusted
Sales
Intangible Amortization $1,690 $(1,690)
Gross Margin 11,608 1,933 $13,541 59.4%
R&D 1,738 (85) 1,653 7.2%
SG&A 7,385 (274) 7,111 31.2%
Interest expense, net 569 (2) 567
Net foreign exchange (gain) loss 2 (1) 1
Debt extinguishment costs 81 (81)
Other (income) expense, net (93) (10) (103)
Earnings from Continuing
Operations before taxes 1,926 2,386 4,312
Tax expense on Earnings from
Continuing Operations 247 378 625
Earnings from Continuing
Operations 1,679 2,008 3,687
Diluted Earnings per Share from
Continuing Operations $0.94 $1.13 $2.07
Specified items reflect intangible amortization expense of $1.690 billion and other expenses of $696 million, primarily associated with acquisitions, restructuring actions and other expenses. See tables titled "Details of Specified Items" for additional details regarding specified items.
9M17
As Specified Items
As % to Sales
Reported (GAAP)
Adjusted
Intangible
Amortization $1,415 $(1,415)
Gross Margin 9,259 2,459 $11,718 59.2%
R&D 1,641 (146) 1,495 7.6%
SG&A 6,705 (595) 6,110 30.9%
Interest expense,
net 569 (19) 550
Other (income)
expense, net (1,279) 1,167 (112)
Earnings from
Continuing
Operations before
taxes 1,657 2,052 3,709
Tax expense on
Earnings from
Continuing
Operations 440 172 612
Earnings from
Continuing
Operations 1,217 1,880 3,097
Diluted Earnings
per Share from
Continuing
Operations $0.69 $1.07 $1.76
Note: The As Reported and As
Adjusted amounts reflect the
impact of adopting the new
accounting rules related to the
recognition of retirement
benefits - See Footnote 1 on
table titled "Condensed
Consolidated Statement of
Earnings" for additional
information.
Specified items reflect intangible amortization expense of $1.415 billion and other expenses of $1.800 billion, primarily associated with acquisitions, including approximately $840 million of inventory step-up amortization related to St. Jude Medical, charges related to restructuring actions and other expenses, partially offset by a gain of $1.163 billion from the sale of the AMO business. See tables titled "Details of Specified Items" for additional details regarding specified items.
A reconciliation of the third-quarter tax rates for continuing operations for 2018 and 2017 is shown below:
3Q18
($
in
millions) Pre-Tax Taxes on Tax
Income Earnings
Rate
As
reported
(GAAP) $718 $166 23.1%
Specified
items 851 61
Excluding
specified
items $1,569 $227 14.5%
3Q17
($
in
millions) Pre-Tax Taxes on Tax
Income Earnings
Rate
As
reported
(GAAP) $626 $65 10.4% 1)
Specified
items 760 163
Excluding
specified
items $1,386 $228 16.5%
1) Reported tax rate on a GAAP basis
for the third quarter of 2017
includes the impact of
approximately $30 million in excess
tax benefits associated with share-
based compensation.
A reconciliation of the year-to-date tax rates for continuing operations for 2018 and 2017 is shown below:
9M18
($
in
millions) Pre-Tax Taxes on Tax
Income Earnings
Rate
As
reported
(GAAP) $1,926 $247 12.8% 2)
Specified
items 2,386 378
Excluding
specified
items $4,312 $625 14.5%
9M17
($
in
millions) Pre-Tax Taxes on Tax
Income Earnings
Rate
As
reported
(GAAP) $1,657 $440 26.6% 3)
Specified
items 2,052 172
Excluding
specified
items $3,709 $612 16.5%
2) Reported tax rate on a GAAP basis
for 2018 includes the impact of
approximately $80 million in excess
tax benefits associated with share-
based compensation.
3) Reported tax rate on a GAAP basis
for 2017 includes the impact of
taxes associated with a $1.163
billion pretax gain on the sale of
the AMO business and the impact of
approximately $90 million in excess
tax benefits associated with share-
based compensation.
Abbott Laboratories and Subsidiaries
Non-GAAP Reconciliation of Adjusted Historical Revenue
Third Quarter Ended September 30, 2018 and 2017
($ in millions) (unaudited)
3Q18 3Q17 % Change vs. 3Q17
Abbott Reported Adjusted Revenue Abbott Reported Non-GAAP
Rapid Diagnostics Reported Reported Organica)
Total Company 7,656 (481) 7,175 6,829 12.1 5.1 7.8
U.S. 2,707 (274) 2,433 2,313 17.0 5.2 5.2
Int'l 4,949 (207) 4,742 4,516 9.6 5.0 9.2
Total Diagnostics 1,824 (481) 1,343 1,279 42.6 5.0 7.5
U.S. 666 (274) 392 369 80.2 6.1 6.1
Int'l 1,158 (207) 951 910 27.3 4.5 8.1
Rapid Diagnostics 481 (481) n/m n/m n/m
U.S. 274 (274)
n/m
n/m
n/m
Int'l 207 (207)
n/m
n/m
n/m
a) In order to compute results excluding the impact of exchange rates, current year U.S. dollar sales are multiplied or divided, as appropriate, by the current year average foreign exchange rates and then those amounts are multiplied or divided, as appropriate, by the
prior year average foreign exchange rates.
Abbott Laboratories and Subsidiaries
Non-GAAP Reconciliation of Adjusted Historical Revenue
Nine Months Ended September 30, 2018 and 2017
($ in millions) (unaudited)
9M18
9M17 % Change vs. 9M17
Abbott Reported Adjusted Revenue Abbott Reported
Divested Adjusted Revenue Non-GAAP
Businessesa)
Rapid Diagnostics Reported Reported Organicb)
Total Company 22,813 (1,524) 21,289 19,801 (187) 19,614 15.2 8.5 7.6
U.S. 8,084 (855) 7,229 6,997 (84) 6,913 15.5 4.6 4.6
Int'l 14,729 (669) 14,060 12,804 (103) 12,701 15.0 10.7 9.2
Total Diagnostics 5,534 (1,524) 4,010 3,710 3,710 49.2 8.1 6.6
U.S. 2,018 (855) 1,163 1,125 1,125 79.4 3.3 3.3
Int'l 3,516 (669) 2,847 2,585 2,585 36.0 10.1 8.0
Rapid Diagnostics 1,524 (1,524) n/m n/m n/m
U.S. 855 (855)
n/m
n/m
n/m
Int'l 669 (669)
n/m
n/m
n/m
Total Medical Devices 8,450 8,450 7,588 (12) 7,576 11.4 11.5 9.1
U.S. 3,726 3,726 3,504 (6) 3,498 6.3 6.5 6.5
Int'l 4,724 4,724 4,084 (6) 4,078 15.7 15.8 11.4
Cardiovascular and
Neuromodulation 7,047 7,047 6,587 (12) 6,575 7.0 7.2 5.1
U.S. 3,404 3,404 3,264 (6) 3,258 4.3 4.5 4.5
Int'l 3,643 3,643 3,323 (6) 3,317 9.7 9.8 5.7
Vascular 2,209 2,209 2,158 (12) 2,146 2.4 2.9 0.6
U.S. 854 854 891 (6) 885 (4.2) (3.5) (3.5)
Int'l 1,355 1,355 1,267 (6) 1,261 7.0 7.4 3.5
a) Reflects sales related to the AMO and St. Jude Medical vascular closure businesses prior to divesting in the first quarter 2017.
b) In order to compute results excluding the impact of exchange rates, current year U.S. dollar sales are multiplied or divided, as appropriate, by the current year average foreign exchange rates and then those amounts are multiplied or divided, as appropriate, by the prior year average foreign exchange rates.
Abbott Laboratories and Subsidiaries
Details of Specified Items
Third Quarter Ended September 30, 2018
(in millions, except per share data)
(unaudited)
Acquisition or
Restructuring Intangible Amortization
Other (c)
Total Specifieds
Divestiture- and Cost
related (a) Reduction
Initiatives (b)
Gross Margin $20 $3 $544 $42 $609
R&D (13) (1) (4) (18)
SG&A (103) (2) (105)
Debt extinguishment costs (67) (67)
Other (income) expense, net 6 (58) (52)
Earnings from Continuing
Operations before taxes $130 $6 $544 $171 851
Tax expense on Earnings from
Continuing Operations (d) 61
Earnings from Continuing
Operations $790
Diluted Earnings per Share from
Continuing Operations $0.44
The table above provides additional details regarding
the specified items described on tables titled "Non-
GAAP Reconciliation of Financial Information From
Continuing Operations."
a) Acquisition-related expenses include
costs for legal, accounting, tax,
and other services related to
business acquisitions, integration
costs which represent incremental
costs directly related to
integrating the acquired businesses
and include expenditures for
consulting, retention, severance,
and the integration of systems,
processes and business activities,
and fair value adjustments to
contingent consideration related to
a business acquisition.
b) Restructuring and cost reduction
initiative expenses include
severance, outplacement, inventory
write-downs, asset impairments,
accelerated depreciation, and other
direct costs associated with
specific restructuring plans and
cost reduction initiatives.
Restructuring and cost reduction
plans consist of distinct
initiatives to streamline operations
including the consolidation and
rationalization of business
activities and facilities, workforce
reductions, the transfer of product
lines between manufacturing
facilities, and the transfer of
other business activities between
sites.
c) Other includes costs associated with
the early extinguishment of debt and
charges related to the impairment of
certain assets.
d) Reflects the net tax benefit
associated with the specified items
and excess tax benefits associated
with share-based compensation.
Abbott Laboratories and Subsidiaries
Details of Specified Items
Third Quarter Ended September 30, 2017
(in millions, except per share data)
(unaudited)
Acquisition or
Restructuring Intangible Amortization
Other (c)
Total Specifieds
Divestiture- and Cost
related (a) Reduction
Initiatives (b)
Gross Margin $26 $53 $501
$ -- $580
R&D (11) (74) (6) (91)
SG&A (84) (7) 1 (90)
Other (income) expense,
net 16 (15) 1
Earnings from
Continuing Operations
before taxes $105 $134 $501 $20 760
Tax expense on Earnings
from Continuing
Operations (d) 163
Earnings from
Continuing Operations $597
Diluted Earnings per
Share from Continuing
Operations $0.34
The table above provides additional details
regarding the specified items described on tables
titled "Non-GAAP Reconciliation of Financial
Information From Continuing Operations."
a) Acquisition-related expenses
include costs for legal,
accounting, tax, and other services
related to business acquisitions,
integration costs which represent
incremental costs directly related
to integrating the acquired
businesses and include expenditures
for consulting, retention,
severance, and the integration of
systems, processes and business
activities, fair value adjustments
to contingent consideration related
to a business acquisition, and
inventory step-up amortization.
The specified items in interest
expense include amortization
expense associated with
acquisition-related bridge
facility fees. Divestiture-related
expenses include incremental costs
to separate the divested businesses
as well as bankers' fees and costs
for legal, accounting, tax, and
other services related to the
divestitures.
b) Restructuring and cost reduction
initiative expenses include
severance, outplacement, inventory
write-downs, asset impairments,
accelerated depreciation, and other
direct costs associated with
specific restructuring plans and
cost reduction initiatives.
Restructuring and cost reduction
plans consist of distinct
initiatives to streamline
operations including the
consolidation and rationalization
of business activities and
facilities, workforce reductions,
the transfer of product lines
between manufacturing facilities,
and the transfer of other business
activities between sites. Any gains
related to the divestiture of a
facility as part of a restructuring
program are also included in this
category.
c) Other expense primarily relates to
the impairment of a financial
instrument and the acquisition of
an R&D asset.
d) Reflects the net tax benefit
associated with the specified items
and excess tax benefits associated
with share-based compensation.
Abbott Laboratories and Subsidiaries
Details of Specified Items
Nine Months Ended September 30, 2018
(in millions, except per share data)
(unaudited)
Acquisition or
Restructuring Intangible Amortization
Other (c)
Total Specifieds
Divestiture- and Cost
related (a) Reduction
Initiatives (b)
Gross Margin $102 $99 $1,690 $42 $1,933
R&D (34) (4) (47) (85)
SG&A (264) (10) (274)
Interest expense, net (2) (2)
Net foreign exchange (gain)
loss (1) (1)
Debt extinguishment costs (81) (81)
Other (income) expense, net (1) (9) (10)
Earnings from Continuing
Operations before taxes $401 $114 $1,690 $181 2,386
Tax expense on Earnings from
Continuing Operations (d) 378
Earnings from Continuing
Operations $2,008
Diluted Earnings per Share from
Continuing Operations $1.13
The table above provides additional details regarding
the specified items described on tables titled "Non-
GAAP Reconciliation of Financial Information From
Continuing Operations."
a) Acquisition-related expenses include
costs for legal, accounting, tax,
and other services related to
business acquisitions, integration
costs which represent incremental
costs directly related to
integrating the acquired businesses
and include expenditures for
consulting, retention, severance,
and the integration of systems,
processes and business activities,
fair value adjustments to contingent
consideration related to a business
acquisition, and inventory step-up
amortization.
b) Restructuring and cost reduction
initiative expenses include
severance, outplacement, inventory
write-downs, asset impairments,
accelerated depreciation, and other
direct costs associated with
specific restructuring plans and
cost reduction initiatives.
Restructuring and cost reduction
plans consist of distinct
initiatives to streamline operations
including the consolidation and
rationalization of business
activities and facilities, workforce
reductions, the transfer of product
lines between manufacturing
facilities, and the transfer of
other business activities between
sites.
c) Other includes the cost associated
with the early extinguishment of
debt, costs related to the
acquisition of R&D assets and
charges related to the impairment of
certain assets, partially offset by
an increase in fair value of an
investment.
d) Reflects the net tax benefit
associated with the specified items
and excess tax benefits associated
with share-based compensation.
Abbott Laboratories and Subsidiaries
Details of Specified Items
Nine Months Ended September 30, 2017
(in millions, except per share data)
(unaudited)
Acquisition or
Restructuring Intangible Amortization
Other (c)
Total Specifieds
Divestiture- and Cost
related (a) Reduction
Initiatives (b)
Gross Margin $870 $174 $1,415
$ -- $2,459
R&D (37) (103) (6) (146)
SG&A (570) (26) 1 (595)
Interest expense, net (19) (19)
Other (income) expense,
net 1,216 (34) (15) 1,167
Earnings from
Continuing Operations
before taxes $280 $337 $1,415 $20 2,052
Tax expense on Earnings
from Continuing
Operations (d) 172
Earnings from
Continuing Operations $1,880
Diluted Earnings per
Share from Continuing
Operations $1.07
The table above provides additional details
regarding the specified items described on tables
titled "Non-GAAP Reconciliation of Financial
Information From Continuing Operations."
a) Acquisition-related expenses
include bankers' fees and costs for
legal, accounting, tax, and other
services related to business
acquisitions, integration costs
which represent incremental costs
directly related to integrating the
acquired businesses and include
expenditures for consulting,
retention, severance, and the
integration of systems, processes
and business activities, fair value
adjustments to contingent
consideration related to a business
acquisition, and inventory step-up
amortization. The specified items
in interest expense include
amortization expense associated
with acquisition-related bridge
facility fees. Other (income)
expense, net includes the gain on
the sale of the AMO business.
Divestiture-related expenses
include incremental costs to
separate the divested businesses as
well as bankers' fees and costs for
legal, accounting, tax, and other
services related to the
divestitures.
b) Restructuring and cost reduction
initiative expenses include
severance, outplacement, inventory
write-downs, asset impairments,
accelerated depreciation, and other
direct costs associated with
specific restructuring plans and
cost reduction initiatives.
Restructuring and cost reduction
plans consist of distinct
initiatives to streamline
operations including the
consolidation and rationalization
of business activities and
facilities, workforce reductions,
the transfer of product lines
between manufacturing facilities,
and the transfer of other business
activities between sites. Any gains
related to the divestiture of a
facility as part of a restructuring
program are also included in this
category.
c) Other expense primarily relates to
the impairment of a financial
instrument and the acquisition of
an R&D asset.
d) Reflects the net tax benefit
associated with the specified items
and excess tax benefits associated
with share-based compensation.
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SOURCE Abbott
